Ari Wald, Oppenheimer Senior Analyst, joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss what’s moving the markets around the opening bell on Tuesday morning.

Video Transcript

BRIAN SOZZI: What are you seeing on the charts? How bad could this row get-- rout get?

ARI WALD: Well, what's amazing here, as these stocks sell off after a tremendous run, many of them-- and we could talk about the benchmark, the NASDAQ 100-- still above its important moving averages, like its 50-day, and so well above even the longer term ones, like its 200-day average. So this is really just a function of the strength we saw going into this peak. That's the beauty of these trend lines. It keeps everything in proportion. And still, this weakness is within proportion of what we still see as an uptrend. So we see-- rather than something more menacing developing, we see an opportunity for longer-term investors to buy this near-term weakness.

BRIAN SOZZI: Ari--

ALEXIS CHRISTOFOROUS: So you're--

BRIAN SOZZI: I'm sorry. Go ahead, Alexis.

ALEXIS CHRISTOFOROUS: So you're actually looking at some choice names within tech to actually buy up, right, now that we're seeing this selloff. Can you share with us some of those names, Ari?

ARI WALD: Sure. I think you can really-- the key point for technology for us-- and, obviously, we know the household names, the Apples and the Microsofts and what not. But really, it expands beyond that. And that's really a key point to our argument of how broadly based it's been. They're all coming in to a certain degree. But I think you can buy them across the board, mid and small caps too, semiconductors, software, and probably-- and so yes, buy the household names-- Apple, Microsoft-- above moving averages.

But really, probably our favorite segment of the group here, and probably a group that's really getting down hard and getting whacked today, are semiconductors. There's Beta there. So there's a reason that they're pulling back hard. But in general, based on our view that this is a bull cycle that should continue, that Beta should get rewarded and cyclicality, we like semiconductors here on this pullback. Nvidia would be one of the biggest within that group.

BRIAN SOZZI: Ari, right how concerned are you right now, as we sit here today and see another day of the selloff, that we might see a pre-election bear market? And I bring that up because the past two or three sessions, I'm seeing money coming out of the market, out of these hot tech trades. But it's not necessarily going into the value sector.

ARI WALD: Right. I think that's such a critical point. It's really just a function of the leaders coming into support. And that's what I like to see. I'd be much more concerned if it would be some of these weak names that are breaking down, that if you think back, that was the setup going into the March swing, which was a bear market for us, where you really had the weaker parts of the market, financials and energy, breaking down ahead of everything else, where it was actually the tech names that held up better.

To me, this is instead more of a function of a healthy setback and a check back in these leaders. And the fact that the laggards are hanging in there I think is encouraging to us. And while I don't think you're going to get that set up, but yes, going into an election year, you can have some more moderation leading directly up to the election.

We've been noting that election year strength usually occurs in the summer. Now it gets a little bit dicier. We're going to be seeing if the market is pricing in an incumbent re-election or if the opposition starts to gain in the polls. Typically, the market will trade lower when the opposition becomes the likely winner. And then you'll see some actually additional volatility in the post-election year, too.

BRIAN SOZZI: Is that what we're seeing, Ari, into the election? Right now, you're seeing institutions raise cash into an election that is obviously very uncertain.

ARI WALD: It could be election risk. It could be just the function of a lot of these names getting extended off their moving averages, and just some near-term profit-taking amid what is typically a poor performing time of the year. September, one of the worst performing months of the calendar year. So again, there's just not the breakdowns to point to-- that suggest and lay out that more menacing scenario.

ALEXIS CHRISTOFOROUS: What do you think is going to get us back on track? Is there going to be one catalyst? Or is it all the money, all the cash that's hanging out on the sidelines, and people will start feeling more comfortable getting back into the market, and that's what's going to get this bull market back on track, Ari?

ARI WALD: Oftentimes, it's just a function of time. If you look back over the last decade, typically these corrections drop about 8%, which we have already reached. But they'll last three to four weeks. We're only three or four days into this. So some additional time consolidation is likely.

But I think, again, for us, the key point of why we do expect that long-term upside is that this has been an incredibly tough market over the last two years. We think the contrarian case is to the upside. If you strip out tech-- and we get it, tech has had a nice run. It's been in a very healthy bull market. We think its steadiness, in fact, is very underappreciated.

The rest of the market has really stunk over the last two years, dating back to the start of 2018, which is what we kind of viewed as this top in global risk, when small caps peaked, Russell value peaked, world equities peaked. And after this two-year bear market in risk, we think some of those beaten up areas are actually starting to show signs of basing. Now, they've hit this near-term hurdle. But I still think there's a possibility where they start to break out to the upside. And that strength will carry us into 2021.

ALEXIS CHRISTOFOROUS: Would love to get your thoughts on Tesla, which we know was one of the most highly-valued companies on Wall Street. It is now down about 16% right now. One of the reasons why is because it was not included in the S&P 500 index. A lot of investors were betting on that, especially after Tesla had reported a profit for the second quarter in July. Were you surprised that Tesla was not included in the index? And was that the right decision on the part of the index committee, do you think?

ARI WALD: That's a great question. It's a great question, because I don't have a great answer for it. I'm just looking at the reaction of Tesla. And there's just a lot of stocks-- I don't think the inclusion or lack thereof of the S&P is really the key determinant of our view of how a stock's going to perform now and going forward.

But again, here's another stock that just really had run up a lot into its recent peak. Down 16% today, I think down 30% from its peak. So this is a stock that had this massive downturn, yet again, it is still above its 50-day average.

So we can quote these wild day-to-day swings in a stock like Tesla, because again, that's how it trades. And if you get a bounceback, it'll be up 10% in a day. So you have to have the stomach. If you're a trader, you have to be able to stomach that volatility.

But if you were to take a step back, and let's look at the long-term trend, a stock that's coming off a new high in the key moving averages, making higher lows for a number of years-- this uptrend is still intact in what we still think is going to be a high-growth-led secular bull market, where these higher growth companies continue to demand a premium in this low-yielding backdrop. This is still an uptrend in our view-- in our work.

ALEXIS CHRISTOFOROUS: All right, you mentioned the volatility that we're seeing in Tesla's stock. Do you think maybe that's one of the reasons why it didn't make it into the index? I mean, do you want a stock that is this unpredictable in an index that is the benchmark for the market and held so widely?

ARI WALD: I'm unsure of the exact reasons why it didn't make the inclusion and if that's going to carry it forward if it's in the-- again, not knowing the details of the report, there's plenty of high Beta stocks in the S&P 500. So in my view, I don't think that's the big reason holding it back.

BRIAN SOZZI: All right, we'll leave it there. Ari Wald, senior analyst at Oppenheimer, always good to speak with you.

ARI WALD: You guys as well. Take care.